Question

The CPI is calculated monthly by the Bureau of Labor Statistics and in the calculation of the CPI, the base year is the benchmark against which other years are compared.

Select one:

True

False

When we are calculating the consumer price index and the inflation rate for a certain year, the inflation rate may depend on the choice of a base year, but the value of the consumer price index does not depend on the choice of a base year.

Select one:

True

False

Indexation refers to the use of a law or contract to automatically correct a dollar amount for the effects of inflation. In the United States, the brackets of the federal income tax as well as Social Security benefits are indexed for inflation.

Select one:

True

False

A reduction in the price of large road construction equipment imported into the United States from Germany will cause the CPI index to increase but the GDP deflator will decrease.

Select one:

True

False

Answer 1

a) True, the bureau of labor statics compare many different CPi in the market every month or in given time period, they can be monthly or bi monthly etc.

b) True, the value of the CPI in the base year will always be 100.

c) False, indexation refers to the connecting of price to the asset value of a goods and service, it is done to deal with the loss of the value of currency at the time of inflation.

d) False, it will not affect the CPi at all because the consumer basket doesn't include construction equipments.